A semiconductor device has a substrate including a terminal and an insulating layer formed over the terminal. An electrical component is disposed over the substrate. An encapsulant is deposited over the electrical component and substrate. A portion of the insulating layer over the terminal is exposed from the encapsulant. A shielding layer is formed over the encapsulant and terminal. A portion of the shielding layer is removed to expose the portion of the insulating layer. The portion of the insulating layer is removed to expose the terminal. The portion of the shielding layer and the portion of the insulating layer can be removed by laser ablation.